Intelsat deal creates Avanti worries

Beleaguered satellite operator Avanti Communications saw a 10 per cent fall in its share price on February 28th, down to an all-time historic ‘low’ of 16.6p on the London Stock Exchanges ‘Alternate’ bourse. At one point the price hit 16.25p.

February 28th also saw London-based Avanti issue its latest results for the half-year to December 31st. Revenues were up at $32.3 million (same period 2015 $31 million) but the loss was doubled (from $3.8 million to $6.3 million), and with fleet utilisation still struggling (now 30-35 per cent compared with the June 2016 position of 25-30 per cent).

However, with this significant increase in fleet utilisation one wonders as to why the increase was not reflected in a matching increase in gross revenues.

The proposed Intelsat and OneWeb merger, facilitated by Japan’s SoftBank, also seemed to worry the market given that the new pairing (if concluded) taps almost exactly into Avanti’s target backhaul and broadband market and there’s mounting criticism of Avanti’s management team. One web-blog posted on February 28th said Avanti’s Ka-band – but geostationary – technology is now likely to be overtaken by the likes of OneWeb, and OneWeb’s LEO and MEO rivals.

Not helping matters is the growing confidence that a pending agreement between Eutelsat and ViaSat (of California) and their joint plans for a ViaSat 3 satellite over Europe and beyond and to deliver multiple spot-beams to the under-served regions where current broadband service is inadequate or non-existant.

There’s another existing broadband supplier increasingly busy in Avanti’s space, and this is the SES/O3b combination of geostationary and MEO satellites. Last week during the SES results call with analysts, its CEO talked about growth rates in the Mobility sector of 95 percent over the past 3 years, its best-performing segment and helped by O3b and its links – and service – to Facebook (which has been a target for Avanti in Africa).

As if anticipating the Intelsat+OneWeb deal, SES’s Karim Michel Sabbagh said: “O3b literally has a five-year time to market advantage versus any other comparable fleet that people entertain.”

O3b will launch another 8 satellites starting this coming winter (2016-17) and 2018. By mid-2018 O3b will have 20 satellites in orbit.